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The Brode Report  |  February 2011

David Brode profile   Hi, this is David Brode. With the market offering bubble-like valuations again, the main article this month tackles Groupon's valuation - see my analysis below. Your comments back are welcome, especially if you think this is a buy.

Also, if you haven't yet visited my new web site, feel free to stop by at www.brodegroup.com.

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Groupon: Not a Deal for Investors at $15B

Don't want to read? Watch the video of me explaining this analysis.

With all the hubub about eye-popping valuations (Facebook at $50B, Groupon rejecting $6B from Google and thinking IPO at $15B) I decided to devote spare brain cycles to evaluating the deal. It's interesting that all three companies listed so far are about connecting advertisers with consumers.

Facebook is expensive, yes, but intuitively I can see why they are worth so much. It's one place in the world where everyone comes together. We know that they are hoovering data about us all and becoming very valuable to advertisers. There are no real substitutes to Facebook, due to network effects, and Facebook has a monopolistic position. I'm sure Zuckerberg will find a way to extract his rents.

Groupon seems another matter altogether. Find out why!

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More Reading on Groupon

Interesting takes on Groupon and Groupon-style economics:

1. Good article on which businesses do best on Groupon

2. Margin compression - why Google buying Groupon is a bad idea

3. Interesting economic reason for Groupon to succeed

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